Retail Performance: I Like Like for Like – I don’t Like Like for Like

H&M gave up their monthly reporting in July. An indication of an ailing retailer? Debatable – Zara never did it in the first place.

Three years after H&M gave up on like for like reporting, they stopped publishing monthly sales figures altogether. H&M follows the path of other well-known retailers that no longer publicly report monthly details of their like for like retail performance.

Critics were quick to jump to the conclusion that H&M stopping their monthly reporting had to be related to difficulties in maintaining growth.

H&M retail performance

H&M Store Portland (photo: brand pilots)

That’s a possibility. However, Inditex and other highly successful retail groups never reported publicly monthly sales, or even like for like. Our question, therefore, seems valid: is there any evidence for a correlation between like for like retail performance reporting and growth success in the day and age of the internet?

Definition: Like for Like Sales
Like for like sales is retail performance measure and often called ‘comp growth’, ‘comparable growth’, ‘organic growth’, or abbreviated as ‘L4L’. Like for like measures how sales grows on a given fixed retail space. The change is reported in % compared to the previous year and shows either a growth or a decline.

Measuring Retail Performance With Like for Like

We wanted to find out whether like for like is still a good retail performance measure and invited retail and controlling executives Andreas Klotz and Guido Schild to battle it out. What’s the deal with like for like? Why be shy about reporting one’s true retail performance? And, why are controllers so keen on like for like?­ We have collected the highlights of their pro and con debate to inspire your own in-house discussion.

Fair View

Like for like reporting supports the management in measuring the sales performance over a period of time compared to the same period of the previous year – to gain a comparable and fair view. Using like for like sales is a method of valuation that excludes any effects of expansion, acquisition or other events that might artificially inflate a company’s sales. –Andreas

Zara retail performance

Zara doesn’t publish monthly like for like sales performance (photo: brand pilots)

Complexity

Tracking like for like retail sales in the time of omni channel distribution is a highly complex undertaking. The time and effort required to calculate a ‘fair share’ of sales contribution from stores is considerable. This raises the question whether it might make more sense to focus on simpler retail performance KPIs such as conversion rates. –Guido

Early Warning System

Like for like comparisons serve as a good early indicator of a shrinking or growing brand awareness. Due to expansion into new markets, the brand may overall still grow, but the like for like of existing stores shows early on whether that growth remains healthy. Twelve months’ worth of shrinking like for like sales almost certainly indicate trouble to come. Like for like sales growth is healthy growth. –Andreas

Brand Retail, Retail DNA, Retail Strategy

Know your retail KPIs and retail performance management – not the first time we cover retail performance.

Full Control

Key Performance Indicators work as performance motivators as long as people believe they can control and influence their performance. We should stop measuring stores managers by their like for like sales performance if they don’t retain full control over store traffic and performance-enhancing tools such as retail marketing and markdown budgets. –Guido

Channel Controlling

Given the current investments in omni channel distribution, it is essential to monitor the performance of each channel and to take into account how their success differs. Like for like retail sales is an important measure to gain a clear view of distribution success and to manage it appropriately. –Andreas

LululemonRetail performance

Lululemon is a successful retailer with public like for like reporting (photo: brand pilots)

Multichannel Thinking

Like for like pure store performance reporting cements last-century thinking and encourages retail managers to view other distribution channels as their competition. New-millennium omni channel thinking requires store managers who encourage consumers to make use of all brand channels in their shopping experience. –Guido

Comparability

Like for like allows us to compare similar entities to one another – not only across different time periods but also between different stores. The objective of such like for like comparison is to have an adequate measure of a competition on a level playing field. –Andreas

Short-Term Thinking

Chasing like for like sales growth to please investors quarter by quarter is short-term thinking incarnate. The biggest risk is that like for like growth is fairly easy to create. With markdowns, for example, sales will soar instantly. After a few quarters of this your like for like will look great, but your brand will burn. –Guido

Howard Schultz, Starbucks

'I chose to eliminate comps from our quarterly reporting, because it is a dangerous enemy in the battle to transform the company'. Howard Schultz, Founder & CEO at Starbucks in 2008, after 200 consecutive months of comp growth

 Familiar & Key Performance Indicator

New-millennium brand distribution and performance controlling likely brought 100 new creative, but complex performance indicators. Like for like sales survived and is still the best-known performance indicator to measure a true and healthy growth. Throw away the fancy performance measures and teach how to manage this key performance indicator instead. –Andreas

Zero Like for Like Management

All retailers are likely to collect like for like performance figures in-house. As long all is well on the growth front, no one cares much about these figures. And when trouble arrives, the list of arguments why these figures don’t tell the full story grows longer by the month. Have the courage to throw out KPIs you don’t follow (Example the 4 Wall Contribution (4WC) is a much more meaningful KPI, but that is worth its own post). –Guido

Retail performance Abercrombie Singapore

Abercrombie & Fitch Singapore, public monthly like for like reporting did not prevent the brand’s long-term downturn (photo: brand pilots)

What Do You Think?

The questions of value, sense and nonsense of like for like retail performance measurement is probably as old as retail controlling itself. What has been your experience with like for like? We would love to hear what you think. Grow the list of qualitative pro or cons by adding your very own perspective in the comments.


About the Authors:

Andreas and Guido fought more than one battle about the best way to measure and manage performance for successful retail growth. Andreas is an experienced CFO and a regular advisor to boards and investors. Guido is a brand coach and interim manager. The best way to get in touch with the authors is via email to Andreas or Guido.

11 thoughts on “Retail Performance: I Like Like for Like – I don’t Like Like for Like

  1. Joao da Silva says:

    Thanks for discussing this topic, found it useful and inspiring. I agree L4L is dangerous as long it takes focus from the 3 core KPIs (CR, ATP, IPT) which employees can influence instantly on a day to day basis and so it could diminish success. On the same time humans over all cultures are used to measure own developments throughout milestones and a glance over past achievements in order to reflect their own growth. I’m really curious to see where this debate will lead to and will include this discussion in my work with Sales. Thanks

  2. Thanks for arguing about this old school topic – I personally totally agree with the quoted Starbucks-CEO Howard Schultz (here): to fight for the transformation of retail companies is much more necessary than to invest time in measuring comparable sales numbers in percentages. Large retailers should better install a L4L-KPI called “number of new, innovative projects tried/implemented in stores per period” instead.

  3. Peter Bisgaard says:

    In our industry the discussion whether to use Like4Like or not is driven by companies who started as wholesale brands and moved into retail in order to overcome distribution bottlenecks. A lot of brands use retail as a vehicle for marketing, branding and getting consumer insights. A lot of those brands did not really look into individual channel performance. For a long time wholesale subsidized retail. Now a lot of brands are cleaning up their retail portfolio eliminating non-profitable stores. And a lot of brands did now start to install an accurate Like4Like reporting in order to clearly understand how profitable each channel is, how it is developing and how to spend investments per channel.

  4. Martin says:

    Like for like is a well known and understandable measure from bottom to top. Times are changing and another model is on the market taking share, so even tougher to get good like for like results. In the end is is about profitability and you can get the business sense thru like for like.

  5. LuDwig says:

    Most statistics battles have always only one goal
    “You’re to blame” no matter if it’s true or not

  6. Peter Wüst says:

    Do we talk about image (=market share) or operational excellence? Just opening stores in these challenging times is not enough. We need measures to quantify our activities also on the level of store activities. My industry experience tells me that very often this discussion is driven by companies and organisations who do not really know how to organize a proper like-4-like controlling and therefore, try to find alternatives to evaluate sustainable profitability of individual channels/stores. With shrinking footfall for brick & mortar retail it is more important than ever to monitor performance development of individual channels in an objective manner rather than calming management, share holders and organization by reporting overall growth (including expansion) – masking a shrinking L4L-performance.
    Let´s focus on customer focused improvements and not on market shares !

  7. Rudolf Bartels says:

    Thanks for the discussion. How can I say goodbye to this “annoying” KPI? The number is not simply replaceable, because top line growth is a crucial factor for the overwhelming amount of highly-leveraged companies and the investor-story in the fight for marketshare. The L4L viewpoint as subitem of top line growth delivers quick and sound data on store-level in large international projects. In further detailed consideration they can make important things visible that need to be changed: e.g. the necessary adaptation of structures on store-level and the generation of more hours available for the customer on busy days. Currently, many react with the scattergun approach of early and high mark downs with the corresponding margin losses.
    New KPIs in the digital transformation should be measurable with channel independent (consideration) of total revenues in their impact on the &L and should not degenerate in the channels as a key figure without steering potential. Otherwise, new loopholes emerge in which parts of the company could hide. Before introducing new KPIs it should be ensured that all work for existing KPIs is completed

  8. Alberto Fossaluzza says:

    L4L is just a way to select your sample of stores and days to minimize biased results when applying descriptive statistics: yes guys, in 2017 our industry still applies measures taught at first course of statistics at university. There is no inference we can derive from these measures. The point is we need to start using statistic modeling to use data to derive decisions. L4L measures should not be used to derive any action or decision as they are just pictures, screenshots, and do not provide any leverage to be able influence final result.

  9. I would prefer L4L. Because it shows the true performance of the Retail Managers.
    Furthermore you can show the effects of new / closed stores.
    By the way: In the reporting tools you should show both P&Ls. One for the total business and one for the comp business.
    Otherwise in the comp P&L you are not able to report the OPEX of the Head Quarter – The apportionment of indirect costs is not possible.

  10. Ralf Rothberger says:

    L4L :yes or no depends on your objective: grow fast via Expansion can be one and L4L secondary, if you expand very fast. However, growing only by Expansion is risky and Comes to an end one day. In case you have stable sqm or more or less balanced closing and new openings , you will need to measure L4L sales, since your L4L costs will ever increase: cogs, staff, rent (likely) electricity etc etc. In case your L4L is not healthy, you are facing 2 questions: how many NonL4L will you Need to Balance this and why should the NonL4L more healthy if the L4F is not .

  11. Jochen Runkel says:

    L4L is an old school way of looking at business results, mainly focused on comparable net sales growth. In an extremely dynamic environment with quickly changing roles of distribution channels, strategic goal setting and focus on their achievement as well as clear focus on profitability are key.

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